What's the best thing to do, buy foreclosure or short sale?

Asked by Paty, Oakley, CA Sun May 10, 2009

We want a better house, would like to keep the one we have but we are not sure how to get a good deal, should we look for short sales or foreclosures? since we can't afford to buy a new one. Thanks

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John D Fink, Agent, Brentwood, CA
Sun May 10, 2009
BEST ANSWER
Good Morning Paty,

The best way to answer the question is "it depends". A successful short is the responsibility of the listing agent on the property and if they are a skilled negotiator. If you have a realtor that is unfamiliar with the process of a short sale, then it can take a long time. When my buyers wish to consider a short sale, the first thing I do is check with the listing agent to see what their success rate is with short sales they have done in the past.

I have been negotiating short sales for over a year and have a 100% success rate. However, prior to being in real estate, I was in the banking industry for over 20 years and I "speak bank" if that makes sense. I have gotten approval on some short sales in less than a week, but some have taken up to 65 days. It all depends on the the bank and what is their bottom line on what they are willing to accept. In most cases, you have to treat a short sale like an REO. You really can't expect to get the sale approved if you ask for items in the contract, like credits for closing costs, repairs, etc. The bank is the one that is paying for those items and not the home owner. You definitely have to have patience.

However, my more important question is you said that you want "a better house" so does that mean you currently own your home and are considering renting or are you going to sell. If you are considering renting your existing home it is very difficult with lenders to move up to a new home and rent your current home. Most lenders are going to require that you have a minimum of 30% equity in your current home. Then you will have to have at least 6 months reserves (6 months of payments) in savings to cover your current home and then another 6 months of reserves for the new home your are purchasing. The reason for this is the banks are trying to prevent what they call a "buy and bail". This is where you purchase a new home and then let the current home go in foreclosure.

I know this is a lot of information, but you need to be aware of all the options and challenges facing you in today's market.

Let me know if you have any more questions.

Thanks,

John
0 votes
Viktor Manri…, Agent, Hercules, CA
Wed May 13, 2009
Short Sale vs. Foreclosures??
Hello Patty, This is an EXCELLENT time to take advantage of the market and UPGRADE your current home! The answer to your question depends on how much time you have, what type of financing you have secured, credit score, how much you have saved up for the down payment, and what your plan is with the existing home.
If time is not an issue and you’re looking for a GREAT DEAL & in pretty good condition, then Short Sale is the way to go, however be sure that your Realtor is very well versed in the SHORT SALE process, and is intimate with the sellers situation, in regard to their financial position, type of hardship they are experiencing, type of loan or loans, indentify the lender. Our average SHORT SALE is taking 50-80 days to close; this is where patience is vital!
Foreclosure Properties are generating “Multiple Offers” and selling for more than asking price, in record time, this being said a high percentage of them may not qualify for FHA financing due to the condition. Foreclosed homes are always sold in AS IS CONDITION, however banks are crediting buyers up to 6% for cost related to the loan. Our office is open daily from 7 AM to 7 PM, please feel free to contact me directly if you find the need to do so. Viktor Manrique—510-467-4911
0 votes
Craig Lawler, Agent, Concord, CA
Tue May 12, 2009
Paty,

There really are pros and cons to each. Some of my current buyers do not want to even consider looking at a short sale, and only want to view bank owned (foreclosure) properties. However, others are looking at short sales as they are keeping all of their options open.

I'd be happy to discuss with you in more detail. Please feel free to contact me at your convenience and I can also email you some information on short sales.


Craig Lawler
Security Pacific Real Estate Services
Craig@RealEstateCraig.com
Cell: 925-698-2581
0 votes
Mr.P, , Arizona
Sun May 10, 2009
Hey Paty,

The Best thing to do is buy a Home that you want and can afford, be it traditional, REO, or Short.

Focus on the Home you want, time is on your side.
0 votes
Chuck Baham, Agent, Byron, CA
Sun May 10, 2009
Hello Paty, It's a tricky question, an REO can be negotiated and closed in about 30 to 45 days, the property is usually not in very good condition, and the banks are a bit harder to deal with where a Short Sale can take from 1 to 6 months sometimes to close but the property is usually in pretty good shape. So, if your not in a hurry either one will work. The banks are dealing with short sales alot faster now than a year ago. If I can be of any more assistance to you please contact me.

If your a Mom, Happy Mothers Day!!!

chuckb.rwdc@gmail.com
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Sun May 10, 2009
The blog below will help you understand the market a little better.
0 votes
Bill Eckler, Agent, Venice, FL
Sun May 10, 2009
Paty,

There are many real estate opportunities in today's market. It is true that many buyers are finding great opportunities to save by purchasing short sales or foreclosures. Our recommendation is to remain open to all possible real estate avenues including the traditional sale.

Many of today's sellers have come to accept the fate of the RE market and understand that as a serious seller they must be able to compete with short sales and foreclosures. They have priced their homes at a level that is competitive with these sales.

It's important for today's serious buyers to remain open to savings, regardless of how it persents itself.

Good luck
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